Following are the highlights of Reserve Bank of India's firstquarterly review of 2008-09 (Apr-Mar) Annual Policy Statement:
MAIN HIGHLIGHTS
* Repo rate hiked 50bps to 9% with immediate effect.
* CRR hiked 25bps to 9% from Aug 30.
* Reverse repo, Bank Rate kept unchanged.
* Have option to do overnight or long-term LAF.
* FY09 GDP aim cut to 8%.
* End-FY09 inflation target close to 7%
* There is accentuation of inflationary pressures.
* Mid-term review of FY09 policy on Oct 24.
STANCE
* To continue active demand management of liquidity.
* Global developments threatening monetary policy credibility.
* Policy has to deal with structural factors driving inflation.
* Cyclical inflation factors impervious to demand mgmt tools.
* Need to consolidate gains seen in boosting supply capacity.
* Financial markets are still fragile.
* Impairment to balance sheets up vulnerability to instability.
* Threats to fincl stability continue to rule
* Inflation pressures likely to intensify further.
GROWTH
* Global growth expected to slowdown further
* Slowdown in advanced nations becoming broad based
* "Heightened" vigil on macro developments maintained.
* Heightened vigil for swift response with apt steps.
* More than anticipated moderation in activity of industrial, svcs sector.
* Monsoon should support medium term farm growth trend.
* Industrial activity moderation to persist short-term.
* Slower demand growth may temper commodity prices
* Slower demand rise may temper inflationary pressures.
INFLATION
* Highest priority to cut inflation from current level.
* Global inflation pressure from food, crude, commodity prices.
* Recent developments show accentuated inflation pressure.
* Monsoon augurs well for domestic supply expansion.
* Domestic food prices may soften in months ahead.
* Inflation to decline noticeably in Jan-Mar period.
* Domestic factors main challenges to policy going forward.
* Domestic factors warrant reinforced policy actions.
* Volatile FX flows, govt cash balances necessitate active liquidity mgmt.
* Banks should be vigilant on credit quality, pursue credit penetration.
FISC
* Govt's fiscal position has strained somewhat.
* Fiscal developments warrant close monitoring.
* Fisc condition amid inflation pressure challenge to policy.
* Fisc condition policy challenge if supply inelasticity stay.
GLOBAL
* Remote possibility of big decline in crude oil prices globally.
* Other commodities including metal prices may also moderate.
* Prudent to assume commodity prices to stay at current elevated levels.
* Increase in India inflation similar to other countries.